Gan & Lee(SH:603087) Orient Securities·2024-06-17 06:31Investment Rating - The report gives a "Buy" rating for the company with a target price of 61.12 CNY based on a 32x PE for 2025 [2][4]. Core Views - The company is expected to benefit from the release of the impact of centralized procurement, with both volume and price increasing, leading to a new growth phase. In 2023, the company achieved revenue of 2.61 billion CNY (+52%) and a net profit of 340 million CNY, marking a return to profitability [1][15]. - The company is deepening its international expansion, with significant growth in overseas sales, which reached 327 million CNY (+132%) in 2023. The company is in the process of applying for market entry in the US and Europe for its insulin products [1][2]. - The company maintains a strong focus on innovation, with over 15% of revenue invested in R&D over the past three years, leading to a rich pipeline of new insulin products [1][2]. Summary by Sections Section 1: Impact of Centralized Procurement - The company has seen a long-term excellent performance, with revenue growing from 690 million CNY in 2013 to 3.61 billion CNY in 2021, achieving a CAGR of 23%. The first round of national procurement had a significant impact in 2022, but the company returned to profitability in 2023 with a net profit of 340 million CNY [15][22]. - The new procurement cycle is expected to last three years, with a total procurement volume of 41.77 million units, an increase of 151% compared to the previous round, and an average winning price increase of 31% [26][28]. Section 2: International Expansion - The company has been pursuing internationalization since 2005, with rapid growth in international sales. The collaboration with Sandoz AG is expected to enhance its market presence in Europe and the US [1][2]. - The company’s insulin products are in the application phase for the US FDA and European EMA, indicating a strong potential for market entry and growth in these regions [1][2]. Section 3: Innovation Pipeline - The company has a robust innovation strategy, focusing on diabetes treatment with a significant investment in R&D. The pipeline includes advanced insulin products that are currently undergoing clinical trials [1][2]. - The company’s R&D investment has consistently been above the industry average, supporting the development of new therapies and enhancing its competitive position in the market [1][2].